Porsche loses £928m from value as Volkswagen merger is delayed

Sports car maker Porsche saw more than €1bn (£928m) wiped off its
market value after the company warned that its merger with Volkswagen will
be delayed by an investigation into its executives' conduct.

Porsche, which makes the 911 and Boxster sports cars, needs financing to repay about €5bn by the end of the yearPhoto: Andrew Crowley

On Thursday shares in Porsche fell more than 10pc after it gave warning that the merger will probably be delayed until next year, and could be completely derailed.

Porsche said there was only a "50:50" chance the deal would be cleared by the end of 2011 after German prosecutors widened their investigation into the behaviour of Porsche's former chief executive and finance director.

Prosecutors said their investigation into Wendelin Wiedeking, former chief executive, and Holger Härter, former finance director, had broadened from market manipulation to breach of trust and credit fraud. Both men deny the charges.

"There is suspicion former board members took existential risks for the company by doing share price hedging deals in connection with the attempt to take over Volkswagen," a spokesman for the German authorities said.

Porsche said: "This reduces the probability that the merger can be achieved under the timeline of the basic agreement from the previous 70pc to 50pc."

The allegations date back to Porsche's stake-building in Volkswagen in the run-up to its unsuccessful takeover of the Golf and Polo manufacturer.

Under Mr Wiedeking, Porsche quietly bought nearly all the freely traded ordinary shares of Volkswagen in preparation for its takeover bid. However, when Porsche revealed its holdings in October 2008, VW shares jumped, briefly making the company the world's biggest by market value.

As the takeover backfired, it left Porsche saddled with debt and it had to turn to VW for help, and the pair agreed a merger.

Speculators who held short positions in VW shares and suffered losses as a result of Porsche's stakebuilding are trying to sue Porsche and its former managers in the US and Germany.

Porsche, which makes the 911 and Boxster sports cars, needs financing to repay about €5bn by the end of the year. The auto maker is planning to raise €5bn in a rights issue by May to fund the debt payments.

Porsche shares closed down €6.6, or 10.7pc, to €55, valuing the company at €9.62bn.